New car Old car Leasing or Cash what do you do?

[ASTA]

Since there has been a lot of talk about houses being expensive and if it is a investment or not lets talk about a value investor choice of a car :D

I have been spending lets say 50 hours the last weeks learning about cars.

for great information regarding BMW look at http://www.bimmerpost.com/

on Mercedes-Benz http://mbworld.org/

So I am driving a very nice car but its 10 years old and thinking about a new one.

As the value investor in me its really tough. As cars are the worst investments. So was thinking about a used car.

The problem now is my current car I have to pay 1000 euros tax and its has 12mpg 20 l/km so a gas guzzler.

And some times I just worry about the gas so I don't even drive.

So just wondering how other value minded people on this board go about buying a car?

I think I will buy a nice 1-2 year old car maybe the new M3 or the new C-class any stories or recommendations :D 

[jouni1]

i don't know if it's just a way to cheat myself, but i do one with financing. something i can pay off in 2-4 years with the tax-free pay i get for using my car.

 

i'd rather have a nice car than be all ingvar kamprady about it. makes a big difference in life quality and happiness if you drive over 5km daily.

 

also, get the jaguar xf. bmw and mb are so passé  ;D

[ASTA]

I don't think that jaguar xf passes the wife test either German or Swedish cars ;D

Regarding financing if one can do that through a company I think that's not a bad idea but I don't have that possibility.

So will probably buy cash a 1 year old BMW we will see.

[Palantir]

Neither of the german makes are "value" picks. Toyota, Honda, Nissan for more economy picks, and Lexus if you want to go the luxury route.

[value-is-what-you-get]

It totally depends on how much you drive.  I drive 25K km a year and buying a car that is around two years old and getting rid of it when it is 4-5 years old has been the least cost method of car ownership for me.  The main slug of depreciation has occurred, the major components will not fail under 125K km so no major expenses there (in fact my current car has factory drivetrain warranty still)  and there will be value left at 4-5 years old before the terminal slide in value occurs.  My wife on the other hand drives maybe 5K km a year so we bought a mint condition Lincoln Town Car (last of the rear drive models - they're good for 500K-1,000K km life  ;D) and will undercoat it and maintain it for probably 10 years anyway.

 

Comes down to usage.

[VersaillesinNY]

Ron Muhlenkamp wrote an essay on a similar topic:

 

Fund Your IRA Every Year or How to Retire Wealthy by Driving Used Cars

 

Stocks and Used Cars: The Road to Wealth?

 

"Recently, I commented to a friend that most “investors” buy stocks the way teenagers buy clothes. He responded, “How should they buy stocks?” Being a slow thinker, I didn’t have a ready answer then, but I do now. Buy stocks the way you would buy used cars. The truly amazing fact is, if you also buy used cars, you can get rich on these two actions alone. It is not hard to save $2,000 per year by driving a used car. The table shows that by investing $2,000 in an IRA every year, you can accumulate $1 million (at 12%) in 36 years or $928,000 (at 10%) in 40 years.

There are three keys to saving $2,000 per year by driving a used car:

 

1. Insure only for liability. This alone will save you more than $600 per year.

 

2. Do not pay interest, which would cost you at least $130 annually per $1,000 borrowed.

 

3. Buy only what you can pay for in cash. Do Your Homework

 

So how do you buy a good used car, or a good stock? In each case, start at your local library. There you will find books titled How to Buy a Used Car (or something similar), which can be read in a few hours. Read one of them. It will give you criteria to use and a framework to work from.$2,000 per Year Compounded at 10% and 12%* "

 

Read more @ http://www.muhlenkamp.com/investment/memorandum/issue_78

[SharperDingaan]

Talk to your friends in low places....

for a modest order specification fee, & new paint job, & a 5th person pick-up at some industrial site  ;)

 

SD

[LC]

I always buy used and American. Parts are available and cheap, and tons of resources are available to do regular maintenance yourself. One day I hope to move to somewhere with warm weather, buy an old ford or GM convertible, and fix it up. Fun, inexpensive, and a good value!

[ASTA]

I have to buy German because I live close by so american brands are not common here.

SD

I am not going to buy Beckham's BMW :D 

http://www.dailymail.co.uk/news/article-448158/Becks-stolen-BMW-used-Macedonian-Government-minister.html

 

I think as I have house paid of and no debt I can buy a used m3 :D

And the good thing is I only drive maybe 8k km per year so can keep that one long too. 

 

 

[rkbabang]

I never buy American, I don't like working on cars, (been there, done that, no thanks).  I always buy cheap and either new or fairly new.  My current commuting car is a Hyundai Elantra that I bought new in 2007 for about $15K.  I'll probably drive it until about 2018-2020 then buy another sub-$20K foreign car.  Before that I had a 1995 Toyota Corolla, which I bought in 1996 with 11K miles on it.  I traded it in in 2007 with 256K miles on it.

 

Our family car is currently a 2006 Toyota Sequoia Limited which we bought in 2011 for $22K (they are around $60K new).  Before that I had a 1997 Toyota 4-Runner Limited that I bought in 2000 for just over $20K.

 

So my method is to buy a Toyota or Hyundai new or slightly used and drive it problem free for a decade or more.

If I ever were to buy a luxury vehicle I'd probably go with Lexus, although I don't think I could ever really enjoy driving the car, knowing that I paid that much for it, which would defeat the purpose of buying it.

[Lance]

 

So my method is to buy a Toyota or Hyundai new or slightly used and drive it problem free for a decade or more.

If I ever were to buy a luxury vehicle I'd probably go with Lexus, although I don't think I could ever really enjoy driving the car, knowing that I paid that much for it, which would defeat the purpose of buying it.

 

rkbabang - have you looked at the Hyundai Eqqus?  It's not a bad deal new, but used it's very hard to beat.  Buyers get a luxury car with Hyundai reliability at a decent price. 

 

Thanks,

Lance

[oddballstocks]

I buy cheap used American cars for cash.  When we last purchased a car American cars were viewed as inferior (might still be, don't know) so there was a discount attached to them.  I could buy an American car with half the mileage at half the cost of a Japanese car. 

 

Cars are a weird thing.  The average car is used 3% of the day, yet they're extremely expensive.  Why spend so much money on something that's going to cost a lot of money to fix and is going to just sit in your driveway? 

 

I know this last option is unpopular with the wealthy or those with money, but I'd say look into public transit or riding your bike if possible.  I started to ride my bike to work last year, it's a healthy decision and it's cheap.  Public transit is another great option, although most with money could never humble themselves enough to get on a train or bus.

[Palantir]

There may be a discount, but you have to look at lifecycle cost, repairs etc....

[oddballstocks]

There may be a discount, but you have to look at lifecycle cost, repairs etc....

 

We haven't found that to be true, but one person's experiences aren't a trend.  Previously I owned two Hondas and a Nissan.  Of those three one Honda and the Nissan were absolute money pits.  My mechanic loved me.  Haven't had much of a problem with the American cars, repairs are cheaper as well.

 

I might just be lucky with our current cars and unlucky with our previous cars.

[Uccmal]

Talk to your friends in low places....

for a modest order specification fee, & new paint job, & a 5th person pick-up at some industrial site  ;)

 

SD

 

Just dont ask for the vehicle history paperwork, lol. 

 

We bought a one year old Hyundai Sante Fe -2010 - It had been a rental - we are near the airport.  20000 km on it - 30% cheaper than new.  Best vehicle I have owned so far.  I also had a Honda Civic.  Bought it used for 15 g, made $400/month on it for 4 years with work, sold it for $2500 - spent abput $1500 in maintenance. 

 

Fuel costs are certainly an issue in EU.  Absolute worst cars I have owned were GMs - never ever again. 

[snow pea]

I experienced something similar to Oddball, but with respect to compact pickups.  I ended up buying a five year old Ford Ranger with 40k miles at a price that, if I were to buy an equivalently spec'd Toyota Tacoma, would have gotten me at best an 8 year old vehicle with 100k miles.  I just don't think the gap in quality is that much (if at all), and I have experienced anecdotal confirmation of my bias insofar as I haven't had a single issue with the truck in the 2 1/2 years since purchasing it. 

[Parsad]

Actually, I bought a 2008 Mercedes B200 Turbo two days ago with only 38K km on it!  I don't like spending a lot on cars, and this thing is in mint shape and was cheap because it was now outside of the warranty.  But with only 38K km, it's almost like a new car.  Got it for $13K CDN!

 

Even the interior, including the seats, don't look like they've ever been used.  It has all of the bells and whistles that I need...heated seats, air conditioning, power everything, hands free telephone, etc.

 

I looked at newer cars, especially with all of the "zero down" financing available...free money!  But, when I saw this and the shape it was in, I was much happier spending far less for a pretty new car, and paid cash instead of financing which was my preference.  Go with a mint-shaped used car with low mileage...it's the value investor's choice! 

 

Although I bought it at a Jaguar/Landrover dealership and that Jaguar F-type was sweet!  As was the Range Rover Sport I took for a test drive!  But I can't justify paying more than $35K for a car.  Just can't do it.  Cheers! 

[Ross812]

http://blu.stb.s-msn.com/i/E7/21B623D77E8B5761464E9BF2F176F.jpg

 

Buffett drives an 8 year old Cadillac DTS...

 

Honestly you should buy what makes you happy if it is not a big expense for you. If buying a BMW will make you happy then go for it. Don't delude yourself into thinking you are making a value decision though. The numbers work out that if your new car costs 25k and gets 30 mpg while your old car gets 12 mpg, its going to take ~100 years to break even with all the money you will be saving in gas considering you only drive 5k miles per year (if you assume a 4% cost of capital you never break even).

 

If you want to be frugal, pick a number that the car should cost you every year and stick to it. If you buy a 6 year old Hyundai that will last 10 years for $8k, assume $500 a year in insurance, $500 in taxes, $500 in repairs your looking at $2300 a year for a car. Personally, I don't care at all about cars and drive a 00 Honda. It's kind of nice to not worry whatsoever about my car: a dog in my backseat, laying down seats and throwing lumber in the trunk, spilled coffee, dirty shoes, driving on a potholed gravel road, parking on the street instead of a garage. I have no stress about it because I can buy another 5 of them on my way home from work and the 6k in financing expenses I save every year equal a really nice vacation.   

 

[Aberhound]

When my friend was 16 he bought a $5000 waterfront lot in birch bay WA instead of a car on the advice of his grandmother. Now it is worth about $1.8 million. When I first started work I bought a big parcel of land with a lake instead of a car. I was poor so even then I had to bring in partners for a $110,000 purchase. Now it is worth a few million undeveloped. My frugal brother had the cash at the time so he shared my gain equally.

 

For young people with time instead of a car buy an asset which will appreciate instead. It is like Buffet said, he didn't spend $0.25 because he knew it would one day be worth thousands.

 

I still prefer to drive old cars. My current car is an 1998 Acura Tl which cost $4000. It is a beautiful car.

[ASTA]

Aberhound

I agree with frugal Land is a good idea but maybe some time ago. As 1997 was a great year for that I know very well.

However, I only spend about 11% per year of what I make so I think I am quite frugal :D

[rkbabang]

 

So my method is to buy a Toyota or Hyundai new or slightly used and drive it problem free for a decade or more.

If I ever were to buy a luxury vehicle I'd probably go with Lexus, although I don't think I could ever really enjoy driving the car, knowing that I paid that much for it, which would defeat the purpose of buying it.

 

rkbabang - have you looked at the Hyundai Eqqus?  It's not a bad deal new, but used it's very hard to beat.  Buyers get a luxury car with Hyundai reliability at a decent price. 

 

That would probably be a better idea than a Lexus, but to be honest, unless I make it on the Forbes 400 list someday, I'll never drive such a car.  I'd constantly be calculating the cost per year and thinking that I'd have to drive it 40-50 years to get the value I'd get from driving an Elantra for only 10 years.

 

[Mikenhe]

 

My car is a Volvo s80 twin turbo – top of the range. The list price in 2001 was 47k

I bought it 5 years later with 86k on the clock for 10,000 – got 3k off the price as it was last day of the year and I was offering cash…

 

 

still going strong now with 144k on it - I expect to run it up to 250k

[rranjan]

I picked up a used 2013 Mazda 5 with 20K miles in a very good condition. Car was checked by dealer and one independent shop before I purchased but I had to play at only one place for inspection. Car was previously in rental fleet. Got it around 30% cheaper than a new car. Hopefully, it should work fine and last for many years.

 

Earlier, I had a used Geo prizm 97  and that lasted me for a long time. We don't drive too much.

 

 

[Compounder]

I drive a 1996 Nissan Station wagon I paid $2,250 for several years ago. Its fully depreciated and keeps going and going and going though I've had to patch up a bit of rust. I'd much rather buy businesses than spend money on a new used car.

[one-foot-hurdles]

When I cash in my fiat shares... :)